(Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table above, assume full employment income is $1,000 while the current equilibrium is $750. Now let exports rise by 50 and imports fall by 50. If the government wants to eliminate the recessionary gap while maintaining a balanced budget:
A) it must increase spending by $100 and decrease taxes by $100.
B) it must increase spending by $250 decrease taxes by $250.
C) it must increase spending by $100 and increase taxes by $100.
D) it must increase spending by $250 increase taxes by $250.

Question

(Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table above, assume full employment income is $1,000 while the current equilibrium is $750. Now let exports rise by 50 and imports fall by 50. If the government wants to eliminate the recessionary gap while maintaining a balanced budget: 
A) it must increase spending by $100 and decrease taxes by $100. 
B) it must increase spending by $250 decrease taxes by $250. 
C) it must increase spending by $100 and increase taxes by $100. 
D) it must increase spending by $250 increase taxes by $250.

Quizplus · Accepted Answer

The Answer of (Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table above, assume full employment income is $1,000 while the current equilibrium is $750. Now let exports rise by 50 and imports fall by 50. If the government wants to eliminate the recessionary gap while maintaining a balanced budget: 
A) it must increase spending by $100 and decrease taxes by $100. 
B) it must increase spending by $250 decrease taxes by $250. 
C) it must increase spending by $100 and increase taxes by $100. 
D) it must increase spending by $250 increase taxes by $250.